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Take control with a debt consolidation personal loan

Debt is so often part of just living life. Moving house, going on holiday, unexpected emergencies... the list goes on and on, and it all costs money. It can be easy to find yourself paying off multiple loans and credit cards to different credit providers - keeping track can be confusing and a bit overwhelming. And this is before you even think about all the different interest rates and fees you’re paying.

Here, we talk you through how debt consolidation loans work and how they could help get your finances back on track.

Interest rates and charges

For every loan, credit card or store credit you have, you can bet you’re also paying different fees and interest rates. This adds up quickly. If you’re just making minimum payments on these debts, the amount of interest you pay could end up being much more than the original purchase over the time of your loan or credit card. What’s more, it can be difficult to keep track of multiple payments due at different times, and payments can easily be missed.

For every loan, credit card or store credit you have, you can bet you’re also paying different fees and interest rates.

How can you take control of your debt?

Don’t worry, it doesn’t have to be all that complicated. One way you can take control of your finances is to take out a personal loan to cover the debt you have. Personal loans often have lower interest rates than many other credit options, so you could pay less in interest over the life of the loan.

By having a personal loan that covers your debt, you’ll have just one simple payment to make every month, which could be a lot easier to keep track of. Unlike credit cards, you can choose the term of your loan so you have an end date in sight and know when you will finish making repayments.

You might also consider setting up an automatic transfer from your nominated bank account so you have even less to think about. Bankwest Easy Alerts can tell you when payments are due and scheduled to be paid.

Calculating your debt

The first thing to do is calculate what debt you want to consolidate into your personal loan. Look at your statements or contracts to know exactly what is owed, as well as what fees and minimum repayments need to be paid to those creditors. It’s important to consider whether you’ll be charged additional fees for paying off any debt early. You also need to take into account any fees that your new personal loan might have.

If you have purchases on an interest free period, carefully consider whether it’s beneficial to consolidate that now or at another time.

You’ll have just one simple payment to make every month which could be a lot easier to keep track of.

Types of personal loans

Generally, there are two standard options when it comes to personal loans - secured and unsecured.

Secured personal loans:

A secured personal loan uses an asset you already own, generally a car, as security on your loan. Secured loans often have a lower interest rate, which could lower your repayments and help you pay your loan down faster. Using your car as security can have other conditions around the minimum loan amount, so be sure to read the T&Cs.

Unsecured personal loans:

Unsecured personal loans don’t require you to have an asset - like a car - ‘secured’ against the loan. Due to the lack of security attached to the loan, the interest rate could be higher and the amount you can borrow might be lower. An unsecured personal loan can be easier and quicker to set up since there isn’t a requirement to validate the security, so you’ll get your funds even quicker.

How debt consolidation works in practice

When you’re taking out a personal loan specifically to consolidate debt, how that debt is paid will depend on your ability to repay your loan. Your personal loan provider may directly pay off your debts and it may be up to you to close all relevant accounts. In some situations, you will be paid the loan amount and pay the debts directly yourself. This will be discussed in depth when you apply for a loan so you’ll know the ins and outs when it comes time to consolidate.

Even though debt can just be part of getting through life, managing it can be made much simpler when you consolidate it into one loan. Calculating what you owe and how you could pay that off more quickly and easily will be a weight off your shoulders and budget.

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48123123124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.

Bankwest Easy Alerts are available for your mobile personal transaction and savings accounts. Limited alerts only are available for credit card transactions. Bankwest Easy Alerts will be sent to any compatible iOS and Android device on which you have the Bankwest App and enabled notifications. Whilst some alerts may be sent to your device once you have enabled notifications, in order to receive the full range of Easy Alerts available you will also need to activate the Bankwest Easy Alerts service within the Bankwest App. Terms of Use apply. Bankwest Easy Alerts is currently supported on iOS 9 and Android 5.0 devices and above. Bankwest Easy Alerts is not available on tablets and Windows devices.